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expense pursuant to section 162, and claim a credit equal to
$5,000 pursuant to sections 38 and 44. The deduction of $5,250
comprised the $2,500 cash paid plus the excess of the promotional
services income over the claimed credit amount--$7,750 minus
$5,000, which equals $2,750. AdaCom issued a Form 1099-MISC, in
the amount of $7,750 to each program subscriber.
None of the people referred by the program subscribers were
required to subscribe to the program in order for the referring
program subscriber to obtain credit towards the purchase price of
the program.
Petitioners’ Tax Return
During the 2000 tax year, petitioner Larry D. Svoboda was
employed full time as a computer programmer, and petitioner
Sheryl J. Svoboda was employed part time as a teacher. For 2000,
petitioners filed a Schedule C, Profit or Loss From Business,
claiming a business of “Sheryls Tupperware” and a Schedule C for
a second business of “Worldwide Products”. For 2001, petitioners
also filed a Schedule C for “Sheryls Tupperware” but did not file
a Schedule C for “Worldwide Products”. The business name listed
on the AdaCom promotional services agreement, signed by
petitioner Sheryl Svoboda, is “Lunar Light Enterprises”, for
which no Schedule C was filed for 2000 or 2001.
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Last modified: May 25, 2011